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Harare Bureau
Zimbabwe Stock Exchange listed company Zimplow is seeking to raise $5 million by way of a rights issue to enable the group to lower funding costs and retire expensive short-term debt. The capital raise will see the company enlarging its ordinary share capital by 33,3 percent. Permission to raise the capital will be sought at an EGM to be held on December 29.
The shares will be offered at a subscription price of 6,42 cents on the basis of one new ordinary share for every two held.
According to the circular, Sino Properties (Proprietary) Limited, an investment vehicle domiciled in Mauritius and the new largest shareholders in the company, will be underwriting the transaction.
The group says the proposed rights issue will increase Zimplow Holdings shareholders’ funds or capital base and hence significantly cover its gearing levels to achieve a more robust and optimal capital structure.
The rights offer is expected to fully retire the short-term expensive debt, reduce the impact of the finance cost in the Group’s statement of comprehensive income and improve the overall working capital position.
The group is currently paying close to $0,65 million in interest costs on its existing debt. The weighted average cost of debt is 11,5 percent per annum.
“Going forward, this is not sustainable for Zimplow as this will negatively impact Zimplow’s operations and ultimately profitability,” said the group.
Zimplow had borrowed $3,4 million in short-term debt to complete its acquisition of TPH last year.
The full amount raised from the rights issue will go towards retiring part of the $13 million owed by the company to various financiers.
As at June 30, 2014, Zimplow had short-borrowings of $10,7 million and long-term borrowings of $1,4 million incurred in the normal course of business.
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derick.khumalo